Paul Rodden • Season: 2023 • Episode: 249
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In episode 249, The Wall Street Journal talks about the future of hydrogen. And how can businesses adopt hydrogen? I'll go over all of this on today's hydrogen podcast.
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The Wall Street Journal talks about the future of hydrogen. And how can businesses adopt hydrogen? I'll go over all of this on today's hydrogen podcast.
So the big questions in the energy industry today are, how is hydrogen the primary driving force behind the evolution of energy? Where is capital being deployed for hydrogen projects globally? And where are the best investment opportunities for early adopters who recognize the importance of hydrogen? I will address the critical issues and give you the information you need to deploy capital. Those are the questions that will unlock the potential of hydrogen, and this podcast will give you the answers. My name is Paul Rodden and welcome to the hydrogen podcast.
In an article in the Wall Street Journal, Giulia Petroni writes clean hydrogen momentum tested by high costs and lack of support. Global efforts to ramp up clean hydrogen are threatened by rising cost pressures and lagging policy support despite strong momentum across the sector. According to the International Energy Agency. The number of low emission hydrogen projects continues to grow rapidly but installed capacity remains low as developers delay or put off plans due to increasing manufacturing, construction and installation costs. The Paris based organization said in its latest hydrogen report, data showed that annual production could reach 38 million tonnes a year in 2030. If all announced projects are realized, with almost three quarters of that coming from electrolyzers machines that use electricity to split water into hydrogen and oxygen, yet only 4% of these projects are under construction or have reached fid this again, according to the IEA.
Again, according to the IEA political momentum behind low emission hydrogen remains strong, but deployment isn't taking off. Inflation is increasing capital and financial costs threatening the bank ability of projects across the entire hydrogen value chain. According to the organization initial cost estimates for several projects have been revised by up to 50%. Amid high inflation and rising interest rates. Clean hydrogen which includes hydrogen made from renewable sources or by capturing carbon dioxide released from hydrocarbon based processes is set to play a central role in the decarbonisation plans of industries, such as chemicals refining and steel, yet it still accounts for less than 1% of the overall production and use of hydrogen. And in recent years, policymakers have rolled out financial tools, such as tax credits or funding programs to support developers. But the IEA found that the time lag between when policy is announced and funds are actually made available is causing project delays. In the US, for example, there is still some uncertainty surrounding the implementation of credits and methodology to assess the carbon intensity of projects under the IRA. This is going according to the organization.
To address these challenges and improve the economic feasibility of projects, the sector should be able to account on a more effective system for the implementation of support schemes as well as on tools such as loan guarantees to address near term financial risks. Developers also need more efficient licensing and permitting processes to speed up the development of infrastructure, including new pipelines, underground storage, and terminals are going according to the IEA government's need stronger policy action on multiple fronts to tap into the opportunity that low emission hydrogen offers. Okay, so the Wall Street Journal bring up talking points that I brought up a few times in the past and something that needs to be addressed in order to move the hydrogen economy forward. In order to navigate the energy transition, we can't rush decision making without the appropriate data points and analytics. So regardless of how much capital is pushed into hydrogen, or how many tax credits or funding programs are offered, this transition is going to take time, infrastructure needs to be built out.
Technology must be vetted several times over and economies of scale have to be leveraged. And it seems to me that those who are complaining about the length of time necessary for this are those who have invested in hydrogen expecting a quick return. This is a long play, it will take decades to be realized. That's why I talked about leveraging existing technology to its fullest and cleanest capabilities, while r&d drives down the cost structure of the next generation of hydrogen technology. This is also why I advise those close to me that if they're looking for a quick turnaround investment to avoid hydrogen right now, these companies don't need to be looking to issue dividend payments, only strictly reinvestment in growth opportunities. Now, if you're looking for long term investments, sure, hydrogen is very promising, but realistically only as a long play. This is going to take time and in turn, patience.
Next, in an article in forbes.com, Whitaker Irvin Jr. writes the business Benefits of hydrogen energy and how to adopt it. Whittaker writes the global desire to transition from hydrocarbons toward alternative energy has gained significant traction with governments, international organizations, businesses and individuals actively participating in efforts to promote and accelerate energy evolution. While addressing climate change and saving the planet is the overarching concern for finding alternative energy solutions. Shifting the hydrogen based solutions can offer governments and businesses numerous benefits beyond environmental considerations. For industries heavily reliant on energy such as agriculture, long haul transportation, aviation, logistics, supply chain and manufacturing. Hydrogen could present a viable alternative to existing carbon based fuels and help compensate for the inconsistencies of solar and wind power. And in so Whitaker lists five ways that hydrogen adoption can benefit business.
Number one is energy cost stability. Considering today's hydrocarbon and natural gas energy prices, renewable hydrogen may become a more cost effective alternative, especially in the long run. By generating hydrogen on site or using hydrogen produced from a commercial hydrogen power plant. Businesses can hedge against fluctuation in hydrocarbon and natural gas prices, creating greater energy cost stability as a 2022. The cost of green hydrogen created using electrolysis was more affordable than natural gas in the UK, Sweden, Italy, Spain, France, Germany and Poland. If more countries invest in the hydrogen market, its price will likely continue to decrease. Number two is government incentives and support the US government and several governments around the world offer financial incentives, tax breaks and grants to businesses that invest in renewable and clean energy Solution.
On July 5 2023, the Biden Harris administration announced a highly anticipated clean hydrogen strategy and roadmap to meet America's decarbonisation objectives of a carbon free grid by 2035 and net zero emissions by 2050. historic investments have been made through the bipartisan infrastructure law, which authorized $62 billion for the US Department of Energy and allocated nine and a half billion in funding for clean hydrogen. The regional clean hydrogen hubs program or h2 hubs has allocated up to 7 billion to establish six to 10 regional clean hydrogen hubs in the US by adopting hydrogen power, businesses may be able to benefit from clean energy investments, become eligible for various government support programs and receive funding to empower their company's future. Number three is reduced regulatory risks and future proofing.
As governments worldwide enforce environmental regulations, businesses that proactively transition to clean energy sources, like hydrogen can mitigate future regulatory risks and avoid potential fines or penalties for non compliance. Governments may tighten regulations and controls to push for less carbon based existing fuels and more clean energy production. For example, governments may tighten offsets, add qualifications and even tax less desirable fuel use. Businesses can preemptively address environmental regulations by transitioning to different energy sources and reducing emissions mitigating potential legal and financial risks. Number four advantages over solar and wind energy. Hydrogen presents unique advantages over solar and wind energy for business owners to consider wind and solar energy can face capacity issues due to sporadic nature of daily and seasonal fluctuations as well as their dependence on sunlight and wind availability. All of this negatively affects power grid stability.
They also require large investments in land or expensive capital intensive offshore construction operations. Hydrogens ability to provide continuous power generation and serve as reliable energy storage medium can complement the intermittency of solar and wind sources. And number five new revenue streams, businesses can explore new revenue streams by venturing into the hydrogen economy. And a report by id Tech X, the global low carbon hydrogen market could reach a value of $130 billion by 2033. The hydrogen economy envisions a future landscape where clean hydrogen plays a vital role in decarbonizing Heavy Industries and long distance transportation, meeting the growing interest in sustainable energy solutions. As an emerging market, there are substantial opportunities for businesses to build infrastructure across the entire hydrogen supply chain. Adopting hydrogen as an energy source requires dedicated planning and serious commitment. A good plan would evaluate the energy needs and processes compared to available Hydrogen solutions.
While hydrogen solutions may appear to be in their infancy, the opportunities in this sector are growing in number every day. Using progressive engineering consulting firms would be a great starting point for developing a technical feasibility study. To shed light on the benefits and economic viability for your individual business. The hydrogen infrastructure is only starting to be practically laid out. It is incumbent upon the adopter to plan for the required safety storage, transportation infrastructure. Adopters can do this in concert with hydrogen producers who can aid an analysis and help identify areas where infrastructure may be shared with others. Selecting energy generation technology the best matches your goals is essential. If co2 is not a significant concern, steam methane reforming may produce the hydrogen required at a lower cost but with some emissions, there are ways to capture or sequester those emissions, which will impact cost. The projects people are contemplating today typically look at electrolyzers for energy generation. Keep in mind that powering electrolyzers is not a trivial matter. And it's not just dollars and cents that must be considered. These decisions could impact the adopters social licence to operate. Equipment Manufacturers are a great source of information to support in this area. If you have the technical people available to separate sales pitches from facts, compliance with regulations and permitting is also at its early stages.
As a result, it's essential to find a trusted partner as a consultant in this area. federal state and local governments may not yet be equipped with enough expertise in this area. So jurisdictions may tend to err on the side of much stricter requirements than will be ultimately necessary. Select a consulting firm that best matches your physical footprint as regulations can vary significantly by country. Okay, so great insight from Whitaker Irvin Jr., who is the CEO of Q Hydrogen, which is developing a new technology for turning water into clean, efficient, renewable hydrogen. And this is great advice for those seeking to adopt a hydrogen integration plan into their operations. This is still new territory and will be for some time, and it's vital to look at the hydrogen landscape practically, and determine which path is right for you. And keep in mind, this article essentially covers two technologies, SMR and electrolysis. And well, both of those are getting the lion's share of the press.
There are other technologies, such as natural hydrogen, which is continuing to see exponential advancement and methane pyrolysis, which we're beginning to see the signs of cost reduction, thanks to r&d in Europe. And if you're looking to take a step into the hydrogen economy, there are tools available to help. The H2 Advantage that we recently announced is a great launchpad to start that journey. And there are our trusted sources that can help guide your decision making for hydrogen capital expenditures, and will help navigate the financing side of energy transitions. If this is something you'd like help with, please email me at email@example.com. And we can help make introductions to other organizations that excel at guiding companies through the hydrogen financial landscape. All right, that's it for me, everyone.
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So until next time, keep your eyes up and honor one another. Hey, this is Paul. I hope you liked this podcast. If you did and want to hear more. I'd appreciate it if you would either subscribe to this channel on YouTube, or connect with your favorite platform through my website at www.thehydrogenpodcast.com. Thanks for listening. I very much appreciate it. Have a great day.